The US decision to impose 100 percent tariffs on branded and patented medicines marks a sharp shift in trade policy, raising risks of higher drug prices, weakened innovation, and global supply chain disruptions.
United States (US) President Donald Trump has announced plans to impose 100 percent tariffs on branded and patented pharmaceutical products, with effect from October 1. The announcement, made on September 26 on Truth Social, comes with a caveat — companies that are breaking ground or have manufacturing plants under construction on American shores will be exempt from the tariffs. For now, generic drugs are outside the tariff regime — providing relief to India, which supplies 47 percent of generics prescribed in the US — but uncertainty looms over whether they may be included in the future. This marks a sharp departure from an international trading system designed to support global health and equitable access to medicines, with far-reaching consequences for global health security, pharmaceutical supply chains, and major drug exporters such as India.
The announcement is not unexpected, as Trump, in an interview in August this year, outlined plans to introduce pharma-specific tariffs incrementally, reaching up to 250 percent over 18 months. These efforts are part of the administration’s goal to bring drug production to American shores and to address its trade deficit, as pharmaceuticals accounted for US$139 billion of the US’s $1.2 trillion total goods trade deficit in 2024. A 25 percent tariff on pharmaceuticals is projected to raise annual US drug costs by around US$51 billion, driving prices up by as much as 13 percent.
The newly announced tariffs will affect exports of branded and patented drugs to the US by companies that have yet to establish local manufacturing.
The newly announced tariffs will affect exports of branded and patented drugs to the US by companies that have yet to establish local manufacturing. This is significant, as a considerable proportion of US drug spending is attributed towards patent-protected medicines. While generics make up nearly 90 percent of all prescriptions, they represent just one-eighth of overall expenditure, highlighting the outsized role of branded drugs in driving up costs.
The US imported approximately US$200 billion worth of pharmaceutical products in 2024, with Ireland, Germany, and Switzerland among the leading exporters. In its recent trade deal with the European Union (EU), Washington imposed 15 percent tariffs on pharmaceutical products. Although generics, ingredients, and other chemical precursors are exempted, the deal marked a significant departure from the long-standing principle of shielding medicines from trade barriers, owing to their public health importance.
Further, in March 2025, the US, under its Trade Expansion Act, 1962, initiated a Section 232 review of its pharmaceutical imports for national security risks. The findings are scheduled to be released in March 2026, so it remains unclear whether the newly announced 100 percent tariffs are linked to this investigation and if additional duties may follow later. The EU is shielded from the newly announced 100 percent tariffs as well as any additional tariffs that may follow the Section 232 review, while Japan may face duties depending on the outcome of the review. The United Kingdom (UK), meanwhile, is continuing its negotiations with Washington to secure tariff exemptions for its pharmaceutical sector.
The current strategy rests on the assumption that it will raise the cost of imported drugs, shift consumer demands towards domestic alternatives, and stimulate US drug manufacturing and job creation.
The US intends to reduce drug costs and bring production to American shores, but tariffs may not be the most effective method to achieve this goal. The current strategy rests on the assumption that it will raise the cost of imported drugs, shift consumer demands towards domestic alternatives, and stimulate US drug manufacturing and job creation. This does not take into account the complexities of expanding domestic pharmaceutical manufacturing. Estimates suggest that meaningful scale-up could take anywhere between five to ten years. Tariffs will likely encourage manufacturers of high-margin branded and patented drugs to establish manufacturing facilities in the US, either by building new plants or by acquiring existing ones. However, such efforts are also likely to be marred by several challenges, including significant capital and time investment, higher construction costs due to steel and aluminium tariffs (resulting from a Section 232 review), stringent regulatory hurdles, and the need for a highly-skilled workforce.
The tariff announcement aligns with Trump’s deadline for drugmakers to incorporate the administration’s new drug pricing policy. Seventeen pharma companies received letters from Trump in August 2025, detailing steps to be taken to reduce drug prices for American patients, and were given a 60-day window to respond. The Executive Order – ‘Delivering Most-Favoured Nation (MFN) Prescription Drug Pricing to American Patients’ – pegs the prices of certain innovative medicines to the lowest price available in a basket of developed countries. While some drugmakers have begun rolling out programmes that offer medicines at reduced prices for US consumers, which may provide short-term relief for patients, in the longer term, however, price controls risk eroding profitability, thereby discouraging investment in research and development (R&D). This could slow down pharmaceutical innovation and diminish incentives for companies to expand US-based manufacturing.
Global pharmaceutical leaders have committed to almost US$320 billion over the next five years to strengthen their industrial capacity in the US.
Since the Trump administration’s announcement of pharma tariffs and MFN pricing, several major industry players have begun investing heavily to expand US manufacturing capacity. Global pharmaceutical leaders have committed to almost US$320 billion over the next five years to strengthen their industrial capacity in the US. Earlier this year, Eli Lily revealed its US$27 billion plan to expand drug manufacturing across America and also indicated its intent to build an active pharmaceutical ingredient (API) plant for oral drugs in Texas, valued at US$6.5 billion. In addition to advancing the development of next-generation therapies such as small molecules and biologics, the move will create jobs for highly-skilled workers, including scientists, engineers, research technicians, and construction workers. The company’s weight-loss drug, orforglipron, has successfully completed Phase III clinical trials, and upon FDA approval, will likely be manufactured at the new plant. Furthermore, AstraZeneca and Roche pledged to invest US$50 billion each; Johnson & Johnson announced a US$55 billion plan; and Sanofi and Novartis intend to invest US$20 billion each in their existing US facilities.
India’s pharmaceutical sector faces significant challenges following the recent US trade measures. Sun Pharma generates substantial sales from patented drugs – valued at $1.2 billion in FY 2025 – of which the US market accounted for about 90 percent. While generics remain exempt from the 100 percent tariffs, any future expansion of the tariff regime to generics and biosimilars would disproportionately impact India, which supplies almost 40 percent of US generics. In addition, medical devices are now included in the Section 232 ambit; India’s medical device exports, valued at nearly US$300 million in FY 2024, already face 50 percent tariffs and could potentially face additional duties.
Indian companies, however, began hedging against tariff risks by deepening their footprint in the US. For instance, Zydus Lifesciences recently acquired Agenus Inc.’s manufacturing facility, marking its entry into the global biologics CDMO business; Syngene International purchased its first US biologics site for monoclonal antibody production; and Sun Pharma acquired Checkpoint Therapeutics, securing an FDA-approved oncology drug. More concerning, however, is that tariffs risk impeding companies from moving up the value chain by stifling R&D in a sector that requires innovation, thereby discouraging value-added production and slowing down industrial growth and job creation.
New Delhi’s recent trade talks with Washington – led by Commerce and Industry Minister Piyush Goyal – focused on lowering tariffs on Indian goods to below 25 percent after the US flagged India’s purchase of Russian oil
Accordingly, tariff tensions have reignited India’s trade diplomacy agenda. At the recent meeting of BRICS Foreign Ministers on the sidelines of the UNGA, leaders—including India—called for urgent reforms in multilateral trade bodies, highlighting how tariff-driven disruptions threaten equitable access to medicines and create systemic pressures for emerging economies. New Delhi’s recent trade talks with Washington – led by Commerce and Industry Minister Piyush Goyal – focused on lowering tariffs on Indian goods to below 25 percent after the US flagged India’s purchase of Russian oil. The negotiations will resume later this year, with pharmaceutical tariffs and H-1B visas emerging as primary concerns, and India will be eyeing a deal similar to the EU-USA agreement, with a tariff cap or exemptions for pharma products. As India navigates complex trade and geopolitical dynamics, including its strategic engagement with the US, it must leverage trade negotiations to protect market access, ensure supply chain resilience, and strengthen its global role in affordable medicines. Ensuring the continued production of generics and biosimilars for both the US and emerging economies in Africa, Asia, and Latin America will be critical to safeguarding global health, sustaining innovation, and reinforcing India’s position as a reliable partner in international pharmaceutical trade.
The recent US announcement to impose 100 percent tariffs on branded and patented medicines represents a significant shift in trade policy with implications for global health, innovation, and supply chain resilience. While the policy is aimed at onshoring production and reducing US drug costs, the proposed measures carry the risks of higher drug prices, diminished innovation, and disruptions to global pharmaceutical trade. For India, the moment underscores the need to balance deep engagement with the US market with its advocacy for reforming multilateral trade bodies. How India navigates this dual role—as both a critical supplier to advanced economies and a champion of equitable access for emerging markets—will shape not only its pharmaceutical sector but also its wider geopolitical influence.
Lakshmy Ramakrishnan is an Associate Fellow with the Health Initiative at the Observer Research Foundation.Health
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Lakshmy is an Associate Fellow with ORF’s Centre for New Economic Diplomacy. Her work focuses on the intersection of biotechnology, health, and international relations, with a ...
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